Illegality of Broker Bets Against Clients
Congressional permanent subcommittee on investigations has today made a case of perjury against the CEO of Goldman Sachs for lying under oath to the Congress.
The Goldman Sachs CEO had stated in his testimony under oath that his firm did nothing wrong, contrary to evidence gathered by the Congress that it was betting against its own clients.
"Betting against" meant that Goldman Sachs did not actually have the mortgage securities which it sold short to its clients. To make such bets, Goldman Sachs had to know that the values of mortgage securities it sold to its clients would almost surely fall and the clients would be forced to liquidate the same at losses with the benefits accruing to Goldman Sachs.
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